Local start-ups think too small, survey finds

Alexandra Cain

Australian entrepreneurs are less ambitious than their US counterparts, less likely to develop global businesses and are not keen on getting rich or changing the world, according to new research.

A survey by Deloitte Private, start-up incubator Pollenizer, Australian start-up publication From Little Things and global research group Startup Genome Project has highlighted concerning find- ings about Australian early-stage ventures.

Silicon Beach: A study of the Australian Startup Ecosystem, which compared 1000 Australian technology start-up businesses with 50,000 similar companies around the world, has found less than 5 per cent of Australian start-ups are building businesses that could expand globally.

The study also shows US companies raise 4.8 times more capital in their early years than Australian businesses. But here's the truly alarming figure. When it comes time to scale up their operations, US businesses raise 100 times more in funds than Australians.

Advertisement

Some Australian entrepreneurs are shocked at these findings.

Alexx Stuart is the founder of Luxury Tastings, a gourmet cuisine business and a member of the Australian start-up community. ''The findings paint a picture of failure and that the start-up community is not trying hard enough. But it's only 20 years old. If you looked at the last five years in isolation, you'd see a positive picture [with start-ups] headed in a great direction,'' Stuart said.

One of the findings was that Australian start-ups are 14 per cent more likely to tackle niche rather than major markets, suggesting a lack of ambition among entrepreneurs. Stuart said this could be due to cultural factors.

''We're not encouraged to promote ourselves. But there are some fantastic people fostering change in that mentality because you have to be cool about promoting yourself to play the bigger game,'' she said.

Only 39 per cent of Australians surveyed for the research have applied for a government grant. Stuart says the federal government should do more to drive innovation.

But Stuart Richardson, founder of Australian venture capital firm Adventure Capital and Melbourne co-working space York Butter Factory, said the government has provided a comprehensive innovation infrastructure for start-ups.

The Innovation Investment Fund and grants accessed through Commercialisation Australia are examples of government-sponsored programs to help fledgling businesses.

Richardson said it is critical for entrepreneurs to be resilient and build sustainable businesses. ''Welfare-reliant entrepreneurship is not going to produce globally competitive businesses,'' he said.

Deloitte partner Joshua Tanchel, the co-author of the report, said it is not all bad news when it comes to Australian start-ups. A companion survey to Deloitte's, the Startup Genome Report, ranked Sydney and Melbourne respectively 12th and 18th in the top cities for start-ups.

Tanchel has called on the government to simplify the application process for government grants.

2 comments so far

Not every tech head who has a start up is an etrepreneur. An entrepreneur turns adversity into profitable opportunity. They then create predicable income and a scalable business. Most business owners just don't know how or don't want to know how.

Maybe it's the tall poppy syndrome that inhibits locals from promoting or focusing on expansion.

The aussies overseas are very different to locals in terms of business acumen and mindset possibly because they've had a taste of working with very ambitious people.

The government just doesn't seem to understand the value of innovation. I guess it comes down to what buys votes. Better to fund blue collar apprenticeships and stay in power than encourage innovation?

Commenter

business - life balance

Date and time

November 26, 2012, 10:07PM

The Infrastructure Investment Fund (IIF) has backed only a total of 16 fund managers to the tune of only $644M since 1998. Seems like a lot until you consider US VC investments in Australian startups alone in the past 5 years, which is north of $100M.

As Colin Kinner says in the fascinating comments threads at the end of this story by Renai Le May, "Think of it this way. . . if you were to round up all of the Australian early stage VC managers (those with money to invest, not those in the last few years of the closed end fund life), and invite them round to your house for a BBQ, you could feed them with one packet of sausages! That’s an appalling situation for a country that desperately needs to build a knowledge economy before it is relegated to being a low-value-add economy and a quarry for the rest of the world."http://delimiter.com.au/2012/05/18/australias-it-startup-scene-blooming-not-dying/